Regulation Is Coming – Make Sure You’re Prepared

Jan 8, 2015

Cities, especially, are in a fight with vacation rentals over regulation. The popularity has exploded faster than law and regulations have been able to keep up. In many cities, vacation rentals operate in a legal nether-zone, with people not being quite sure where they stand. Some cities require permits. Others require inspections. The regulations vary between countries and states, even switching between different cities and neighborhoods. The laws seem byzantine and idiosyncratic, all underpinned in a deep legalese.

Hotels and portal websites are setting their lawyers at war. Briefcases have been clashing in New York for years. Un-leased rentals for fewer than 30 days in New York are basically illegal, but a quick search will reveal thousands available for rental. Hotels are lobbying that these laws are more strictly enforced.

San Francisco reached a compromise by allowing owners to rent their property for up to 90 days of the year, providing that the owner occupies the property for the remainder of the year. For owners with one property, this seems like an amicable solution. But, for the owner of a growing business in the city, it could spell disaster. With more cities focusing and defining their accommodation regulation to cover short term vacation rentals, some property owners could find themselves with properties that do not meet the new standards. Today we’re looking at the areas that we think are likely to be under new regulations in major cities very soon.

City Laws
Using the example of Barcelona, properties in the city center must acquire a licence that permits short term tourist rentals. These are issued after an inspection of the property’s suitability. The problem is that these licences are no longer being issued. The city is full. A city has the power to effectively shut down expansion of the vacation rental industry. Always check the laws, and check when they were last amended. Vacation rentals have undergone such rapid expansion in the last five years that any unchanged property laws that outdate this growth are likely to be up for review very shortly.

Length of Stay
Short term rentals are generally defined as anything less than 30 days. Longer stays will generally require paperwork to be signed. This is how the growth of vacation rentals has so far, generally managed to skid under the radar. Proactive city councils are now dictating the amount of short term stays that can be rented during the year, also including the total number of days. Could your business survive if you could only rent your properties for 90 days of the year?

Fire and Safety
This is a key difference between the regulations that hotels and vacation rentals face. Hotels have had to have fire escape provisions for years. They require emergency exits, disabled access and regular safety inspections. The safety of every guest also has to be insured and guaranteed.

Cleanliness
In the age of Internet reviews and the instant spread of reputation, it’s arguable that cleanliness is regulated by customers themselves. But, certain basic standards could be applied. This is especially true of the increasing number of properties that are starting to offer additional services such as food delivery.

Tax
If a vacation rental is being operated outside the law, it is unlikely that the proper tax is being paid. This is not only a problem for the owners that run the risk of serious fines, but the government that is missing out on millions in tax revenue. Setting clear and simple regulations and giving owners detailed information on the tax that is due from their properties will increase city funding and allow owners to operate their businesses with clear knowledge of all of their required outgoings.

The demand for vacation rentals is already here. They have managed to become popular and established before the law had chance to notice. Attempting to retrospectively apply prohibition is unlikely to be effective. Councils will have to regulate, working together with owners, hoteliers and residents to form a satisfying balance. There is a perception that the vacation rental industry doesn’t want regulation. Hotels argue that they enjoy an unfair advantage in the marketplace and actively dodge expenditure on safety standards, tax and things that hotels are forced to pay just to operate.
But, with regulation comes more security and safety for business owners. They can be assured of operating entirely legally, know the tax they have to pay and avoid fines or penalties. Right now many businesses are in the difficult position of attempting to expand a business that might be effectively illegal in some areas within a year or two.

What we can sure about is that these regulations are coming. The problem is that they are likely to differ wildly. Keeping up to date with the regulations in your city and making sure you’re as ready as possible will set you in the best possible stead for the time when the laws surrounding your business do change.

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